2024 (4) TMI 369 - HC - VAT and Sales Tax

Levy of tax - turnover of old machinery and equipment after the closure of business - scope of Business as contained in Clause (iv) of Section 2(e) of the U.P. VAT Act, 2008 - liability of payment of interest on the admitted turnover in terms of Sub-section (2) of the Section 33 of the U.P. VAT Act, 2008 - HELD THAT - Upon a perusal of the orders passed by the Assessing Officer, First Appellate Authority and the Tribunal, one is able to decipher that the Tribunal has categorically come to the finding that the items that were sold after the closure of the business amounting to Rs. 1,33,20,839/- are in the nature of plant and machinery falling under capital goods. In light of the same, the Tribunal came to the finding that these goods would not fall within the definition of Section 2(e)(iv) of the Act - The finding of the Tribunal and the First Appellate Authority that the particular goods were in nature of capital goods and not the goods under Section 2(m) of the Act is not a perverse finding. This Court in its revisional jurisdiction would not enter into the findings of the Tribunal unless the same are factually unbelievable and perverse. The Tribunal being the last fact finding authority, its findings are paramount and should not be interfered with by this Court unless the same are patently illegal and perverse. It is to be noted that the amended definition of Section 2(e) of the Act only includes the sale of goods acquired during the period in which the business was carried out. This definition pre-supposes that the goods were acquired during the period in which the business was carried out and were subsequently sold after the closure of the business. The definition could very well have been amended to include all kinds of goods including capital goods. The legislature has limited itself to only sale of goods , and therefore, the definition of goods as per the Section 2(m) of the Act has to be taken into account and not the goods which fall under the definition of capital goods in Section 2(f). There is no requirement to interfere with the impugned order passed by the Tribunal. The revision petition is, accordingly, dismissed.

Summary

Issues:
The main issue involves the taxability of the sale of old machinery and equipment after the closure of business under the amended provisions of the U.P. VAT Act, 2008. The specific questions of law revolve around the interpretation of the term "business" and the liability of interest on the turnover.

Interpretation of "Business" under U.P. VAT Act, 2008:
The revision petition challenges the Tribunal's order affirming that the turnover from the sale of old machinery and equipment after business closure is not taxable. The key contention is whether such transactions are exigible to tax u/s 2(e)(iv) of the Act. The petitioner argues that post-amendment in 2014, any post-business closure sale of goods acquired during business operation is taxable. However, the respondent asserts that the sold items fall under the definition of "capital goods" and not "goods" as per the Act.

Capital Goods vs. Goods Taxability:
The Tribunal found that the items sold post-business closure were capital goods, not falling under the taxable definition of goods u/s 2(e)(iv). Relying on precedents, it was concluded that plant and machinery do not constitute goods for tax purposes. The Tribunal's decision aligns with the legal interpretation that the sale of capital goods after business cessation is not subject to taxation under the Act.

Legislative Intent and Scope of Tax Levy:
The amended Section 2(e) of the Act limits taxable transactions to the sale of goods acquired during business operation. The legislature's choice to exclude capital goods from this definition indicates that only goods, not capital assets, are intended for taxation post-business closure. Therefore, the sale of plant and machinery after business cessation falls outside the tax purview as per the Act.

Conclusion:
The Court upheld the Tribunal's decision, dismissing the revision petition. The findings support that post-business closure sales of plant and machinery, categorized as capital goods, are not taxable under the U.P. VAT Act, 2008. The questions of law were resolved against the revisionist, affirming the non-taxability of such transactions.